Lessons learned from the great depression

Money supply decreased considerably between Black Tuesday and the Bank Holiday in March when there were massive bank runs across the United States. There are also various heterodox theories that downplay or reject the explanations of the Keynesians and monetarists.

Lessons learned from the great depression

You can help by adding to it. April Marxists generally argue that the Great Depression was the result of the inherent instability of the capitalist model. Oil prices reached their all-time low in the early s as production began from the East Texas Oil Fieldthe largest field ever found in the lower 48 states.

With the oil market oversupplied prices locally fell to below ten cents per barrel. Electrification and mass production techniques such as Fordism permanently lowered the demand for labor relative to economic output. Filene were among prominent businessmen who were concerned with overproduction and underconsumption.

Ford doubled wages of his workers in The over-production problem was also discussed in Congress, with Senator Reed Smoot proposing an import tariff, which became the Smoot—Hawley Tariff Act. The Smoot—Hawley Tariff was enacted in June, The tariff was misguided because the U.

These trends are in nowise the result of the present depression, nor are they the result of the World War. On the contrary, the present depression is a collapse resulting from these long-term trends.

Lessons learned from the great depression

King Hubbert [57] In the book Mechanization in Industry, whose publication was sponsored by the National Bureau of Economic Research, Jerome noted that whether mechanization tends to increase output or displace labor depends on the elasticity of demand for the product.

It was further noted that agriculture was adversely affected by the reduced need for animal feed as horses and mules were displaced by inanimate sources of power following WW I. As a related point, Jerome also notes that the term " technological unemployment " was being used to describe the labor situation during the depression.

Wells, [22] The dramatic rise in productivity of major industries in the U.

Interactive Dust Bowl

This decision was made to cut the production of goods because of the amount of products that were not being sold. Farmers were forced off the land, further adding to the excess labor supply.

Agricultural productivity resulting from tractors, fertilizers and hybrid corn was only part of the problem; the other problem was the change over from horses and mules to internal combustion transportation.

The horse and mule population began declining after WW 1, freeing up enormous quantities of land previously used for animal feed. Most of the benefit of the increased productivity went into profits, which went into the stock market bubble rather than into consumer purchases. Thus workers did not have enough income to absorb the large amount of capacity that had been added.

It was argued that government should intervene by an increased taxation of the rich to help make income more equal. In the USA the economic policies had been quite the opposite until Americans looked towards insubstantial banking units for their own liquidity supply. As the economy began to fail, these banks were no longer able to support those who depended on their assets — they did not hold as much power as the larger banks.

Monetary policy, according to this view, was thereby put into a deflationary setting that would over the next decade slowly grind away at the health of many European economies. This resulted in inflation because the supply of new money that was created was spent on war, not on investments in productivity to increase demand that would have neutralized inflation.

The view is that the quantity of new money introduced largely determines the inflation rate, and therefore, the cure to inflation is to reduce the amount of new currency created for purposes that are destructive or wasteful, and do not lead to economic growth.

After the war, when America and the nations of Europe went back on the gold standard, most nations decided to return to the gold standard at the pre-war price. When Britain, for example, passed the Gold Standard Act ofthereby returning Britain to the gold standard, the critical decision was made to set the new price of the Pound Sterling at parity with the pre-war price even though the pound was then trading on the foreign exchange market at a much lower price.

At the time, this action was criticized by John Maynard Keynes and others, who argued that in so doing, they were forcing a revaluation of wages without any tendency to equilibrium.

One of the reasons for setting the currencies at parity with the pre-war price was the prevailing opinion at that time that deflation was not a danger, while inflation, particularly the inflation in the Weimar Republic, was an unbearable danger.

Lessons learned from the great depression

Another reason was that those who had loaned in nominal amounts hoped to recover the same value in gold that they had lent. This arrangement was codified in the Dawes Plan.

In some cases, deflation can be hard on sectors of the economy such as agriculture, if they are deeply in debt at high interest rates and are unable to refinance, or that are dependent upon loans to finance capital goods when low interest rates are not available.

Deflation erodes the price of commodities while increasing the real liability of debt. Deflation is beneficial to those with assets in cash, and to those who wish to invest or purchase assets or loan money. More recent research, by economists such as Temin, Ben Bernankeand Barry Eichengreenhas focused on the constraints policy makers were under at the time of the Depression.

In this view, the constraints of the inter-war gold standard magnified the initial economic shock and were a significant obstacle to any actions that would ameliorate the growing Depression.

According to them, the initial destabilizing shock may have originated with the Wall Street Crash of in the U. The gold standard required countries to maintain high interest rates to attract international investors who bought foreign assets with gold.

Grandma’s Wisdom

Fixing the exchange rate of all countries on the gold standard ensured that the market for foreign exchange can only equilibrate through interest rates. As the Depression worsened, many countries started to abandon the gold standard, and those that abandoned it earlier suffered less from deflation and tended to recover more quickly.

Monetary Policy, wherein he argued that the Federal Reserve actually had plenty of lee-way under the gold standard, as had been demonstrated by the price stability policy of New York Fed governor Benjamin Strongbetween and Oct 13,  · Memories of salvaging and stealing to avoid going hungry are part of the legacy of the Great Depression.

Some iReporters say they can't help but . The book of Jonah is more than just a delightful story for children.

Here are 10 valuable lessons gleaned from Jonah's encounter with the great fish and the people of Nineveh. As someone who has been diagnosed with depression in the past and sometimes still struggles with it, I thought this short write-up was well-written and thoughtful.

After my previous article in which I shared some hard-learned ideas I’ve gained over the years, time passed and I found myself encountering more and more along the way.

As these principles would occur to me occasionally, I recorded them in my notes before they had a chance to slip away. Below is a list of 15 more truths in particular that I’ve learned through many difficult moments in my life. Library of Congress, Prints & Photographs Division, FSA-OWI Collection It isn't difficult to see shades of the Great Depression in the Great Recession, and in today's volatile economy.

High. Depression is a hard topic to talk about. It's an even harder thing to live through. I've lived with depression for more than two decades. After a while, there were a few things I learned about.

Stories from the Great Depression – The Frugal Farmer